Single Trust for Multiple Plans??

[Guest halka]

An employer has two defined contribution

plans (401k and money purchase) and would like to administer them under a

single TRUST. This would simplify some audit and filing issues, but create

some new accounting and compliance issues. Is there a practical article, rules of thumb, or first-hand experience on the pros and cons of this type of master trust?

[Ervin Barham]

The plan document would have to allow the combining of assets for investment purposes. This may throw you out of prototype status.

Having dealt with many of these over the years, it does simplify trust accounting, but you then have the job of splitting out each plan's assets for 5500 purposes. Sometimes that can take as much time as the trust accounting.

Employee directed 401(k) plans do not work well in this type of situation. For instance - how do you allocate earnings on the 401k contributions to the employees - do you weight them in some way? Document will have to be drafted carefully. I'm not saying it can't, it's just seems to create some additional work. Best case is usually a money purchase/profit sharing combination directed by the trustee.

Check with the plan document sponsor to see if this is an option.

I hope this helps.